Lithium stocks tumbled on Wednesday as Bank of America cut industry leaders Albemarle and SQM to underperform from neutral, saying the market for the battery metal will shift from adequately supplied to oversupplied in 2024 and 2025.
Concerns about the medium-term demand outlook come after The Wall Street Journal reported on Tuesday that General Motors will delay EV pickup production at its Orion assembly plant by a year, to late 2025. GM aims "to better manage capital investment while aligning with evolving EV demand," the WSJ wrote.
New Price Targets For ALB, SQM, LAC
Meanwhile, Deutsche Bank cut its rating on Lithium Americas from buy to hold following the company's spinoff of Lithium Argentina on Oct. 3. Analyst Corinne Blanchard gave LAC stock a 7 price target, reflecting elevated execution risk for its Thacker Pass project. However, Blanchard gave spinoff LAAC a buy rating and 11 target, calling it a "compelling way to play the lithium growth story with a de-risked producing asset" in its Cauchari-Olaroz lithium brine development.
BofA analyst Matthew DeYoe slashed his ALB price target to 161 from 212 and SQM target to 59 from 69.
Lithium Prices
Those price target cuts followed BofA reducing its outlook for lithium prices by 20% to 50% from 2023 through 2025.
The spot price of lithium carbonate in China has tumbled to $23,850 per ton, down 70% from its peak last November.
Benchmark Minerals, in an Oct. 11 report, attributed persistent weakness in lithium spot prices to macroeconomic headwinds in China slowing EV sales, while lithium supply has "remained robust."
Benchmark expects mostly stable prices through the end of this year, continuing into 2024, when it sees "a small surplus." The firm notes that setbacks for any significant lithium project could throw a narrow surplus into a deficit.
On the demand side, Ford Motor last month pushed back its goal for producing 600,000 EVs at an annual rate from late 2023 to late 2024. With Tesla set to report Q3 earnings after Wednesday's close, lithium investors will be listening for any guidance about 2024 output. In a Sept. 27 note Deutsche Bank analyst Emmanuel Rosner wrote that he expects Tesla to indicate plans for about 2.1 million deliveries next year vs. expectations (at the time) of 2.3 million units.
Lithium Stocks
ALB stock dived 9.9% to 152.64 on Wednesday, on track for its lowest close since May 2021. SQM stock slid 7.4% to 55.04. LAC stock sank 8.9% to 8.29, while Lithium Argentina fell 4.2% to 6.70.
